Using an Employer of Record in Puerto Rico 

International businesses face unique challenges, particularly in aspects such as hiring, finding, and paying employees in Puerto Rico. To engage talent quickly while maintaining compliance with local regulations, companies find it efficient to onboard talent through an Employer of Record in Puerto Rico.

An Employer of Record like Payoneer Workforce Management can help you manage payroll, tax compliance, and other aspects of employment administration. This helps reduce the administrative overhead and related expenses.

Keep reading this article to know more about using an Employer of Record in Puerto Rico and discover how Payoneer Workforce Management can help organizations expand globally.

How to hire employees in Puerto Rico

Employers who are looking forward to engaging talent in Puerto Rico can do so in three ways: 

1. Set up a local entity: Setting up a local entity facilitates the direct hiring of employees from all across the globe. However, you still have to navigate the registration procedures, local labor laws, tax regulations, and ongoing administrative responsibilities. 
2. Hire independent contractors: Hiring freelancers or independent contractors is a convenient and flexible option that you can resort to. Although it is a cost-effective option, there remains a risk of misclassification of employment type. This can further lead to legal consequences and penalties. 
3. Partner with an Employer of Record: Employees in Puerto Rico can be engaged through an Employer of Record, they act as the legal employer for local talent, and assists with onboarding, payroll management, benefits, local compliance and more. 

Payoneer Workforce Management helps you engage and onboard talent across 160+ countries without having to set up a legal entity. We help you set up localized benefits as per local laws and requirements.

How to onboard employees in Puerto Rico

When you hire new employees, it is important that you conduct a thorough onboarding process to integrate new joiners into an organization and get them well-versed with the culture of the new workplace. This involves offering cultural exposure, providing knowledge about the tools, software, systems, etc. 

The onboarding workflow usually goes as follows:

• Completing the documentation and setting up the payroll processing system: To begin with, you have to issue an employment contract that clearly states the terms of the employment. You should also collect the employee’s documents and get them registered in the local payroll system. 
• Distribution of equipment: Based on their roles, employees should receive the necessary tools, devices, and system access that are needed to start working. 
• First-week briefing: In the first week, you should provide a brief introduction to the company’s policies, expectations, key processes, and all other information that is specific to an individual’s role. 
• Introduction: You should arrange meetings that can help the newly joined candidates connect with their team and engage with colleagues better. 

Payoneer Workforce Management helps companies hire and manage talent across borders in a compliant way through its technology platform.

Pay employees in Puerto Rico

As an employer, you have to maintain a compliant payroll system to pay employees in Puerto Rico. This ensures fair compensation to all employees. 

Income tax and social security

• Income tax in Puerto Rico ranges between a progressive scale of 0% to 33%. 
• Employees are enrolled under the Old-Age, Survivors, and Disability Insurance (OASDI) program, popularly known as Social Security. Under this, workers and their families receive a monthly benefit in case there is a mishap like disability or death of the worker, retirement, and so on. This amount, however, is based on the employee’s earning level. 

Annual bonus 

Employees in Puerto Rico are entitled to receive an annual bonus of $600 if they have worked for 700 hours in the duration of 12 months from 1st October through 30th September of the following calendar year. This bonus is credited to the employee’s bank account between 1st December and 15th December of every year. 

Using an Employer of Record offers a simple way to pay employees compliantly in Puerto Rico. Our employee cost calculator can help you estimate the overall expense.

Employment laws in Puerto Rico

Puerto Rico adheres to a set of well-defined labor laws that make it easier to maintain fairness while engaging employees. The employment laws in Puerto Rico are as follows: 

Working hours

The standard working hours for employees in Puerto Rico are 8 hours a day, which means 40 hours a week. Part-time employees have to work 30 hours per week. 

Overtime

If employees work overtime, they have to be paid one and a half times their normal hourly wage. 

Probation period

In Puerto Rico, the probation period depends on the employment type. The probation period for hourly employees is 9 months, and that for full-time employees is 12 months. This period cannot be altered unless both the employer and the employee agree to a shorter period.

Payoneer Workforce Management helps you stay compliant with local labor laws through its global infrastructure.

Minimum wage in Puerto Rico

Employees in Puerto Rico are entitled to a minimum wage of $10.50 per hour. Employers and employees should follow official government websites to stay informed about any updates to the minimum wage rates.

Employment contracts in Puerto Rico

Both verbal and written employment contracts are considered legally valid in Puerto Rico. However, written agreements, written in a lucid and easy-to-understand language, are highly recommended since they offer better clarity. The terms stated in the employment contract should comply with both the local and federal labor laws. 

Alongside these, an employment contract should contain information on the following: 

• The employee’s name and other personal details
• The type of contract 
• The commencement date of employment 
• The job description and the employee’s roles and responsibilities 
• The remuneration, including bonuses, deductions, and other benefits
• The probation periods
• The working hours and other statutory leave entitlements
• Conditions for termination, notice period, severance pay, and other benefits 

When employers in Puerto Rico use an Employer of Record, it becomes simpler for them to frame the employment contracts. Payoneer Workforce Management allows employers to navigate compliance by taking into consideration the local benefits while framing employment contracts. 

Leave policy in Puerto Rico

In Puerto Rico, you have to provide certain leaves to employees, which are as follows:

Annual leave

In Puerto Rico, employees are entitled to paid annual leave on the basis of their seniority. 

Sick leave

Employees in Puerto Rico who have worked for at least 130 hours a month are eligible for paid sick leave. They can accrue 1 day of sick leave every month, which totals to 12 days every year.

Public holidays

There are 19 paid public holidays in Puerto Rico that employees are entitled to.

Here’s the list of public holidays in Puerto Rico:

• New Year’s Day
• Epiphany
• Martin Luther King Jr. Day
• Presidents’ Day
• American Citizenship Day
• Day off for American Citizenship Day
• Emancipation Day
• Good Friday
• Memorial Day
• Juneteenth National Independence Day
• US Independence Day
• Constitution Day
• Labor Day
• Día de la Raza
• Veterans Day
• Discovery Day
• Thanksgiving Day
• Christmas Day

Maternity leave

Female employees in Puerto Rico are entitled to a maternity leave of 8 weeks. This duration is divided into two parts: 4 weeks of prenatal leave and 4 weeks of postnatal leave.

During this period, the employees are paid by the employer. In case of complications, employees may extend the maternity leave by 12 weeks, but this will be unpaid.

Paternity leave

There is no provision for paternity leave in the private sector in Puerto Rico.

Adoption leave

The duration of adoption leave for employees in Puerto Rico depends on the age of the child. If the child is younger than 5 years and not enrolled in school, employees shall get 8 weeks of leave. If the child is older than 6 years, employees are entitled to 5 weeks’ leave.

Caregiver leave

Employees in Puerto Rico are entitled to paid leave for 5 days if they have to take care of a spouse, parent, child, disabled, or an elderly person close to the employee.

Other leaves

There are some other leaves that employees in Puerto Rico are entitled to. They can get catastrophic illness leave for 6 working days, Jury Duty leave for a maximum of 15 days, and unpaid military leave for an unspecified number of days. 

Work permit in Puerto Rico

Professionals who are willing to work in Puerto Rico should hold a work permit. It is an official document that authorizes individuals from other countries to work and seek employment in Puerto Rico. Foreign nationals must also hold a valid visa if they wish to work in Puerto Rico.

To obtain a work permit, employees should apply for a Puerto Rico work visa. They are also required to submit an application form along with other relevant documents, including a valid passport.

For further information, both employers and employees should consult official government resources to understand the requirements and ensure compliance with local regulations.

Background check in Puerto Rico

Employers may conduct background checks before hiring employees; however, they must comply with local regulations. Employers should also obtain prior consent from the employee before conducting such checks.

These checks may include verifying the employee’s employment history, criminal records, educational qualifications, and other relevant screenings to determine whether the employee has been involved in any unlawful activities.

Employment termination in Puerto Rico

Termination refers to a scenario in which an employment tenure ends before the duration specified in the employment contract. This can happen in the case:

1. An employee resigns
2. The employer and employee mutually agree to terminate the employment contract
3. The employer decides to terminate an employment contract during the probation period
4. The employer terminates an employment contract on the grounds of misconduct, poor performance, absence without leave, redundancy, and so on

There is no mandatory rule about notice period in Puerto Rico. Either the employer or the employee may choose to terminate an employment contract without any prior notice. 

Severance pay

In case of unjustified dismissal, employees get compensation based on their length of service. 

Company registration in Puerto Rico

Any foreign company willing to operate in Puerto Rico should obtain authorization from the Puerto Rico Department of State by filing these documents: 

• A certificate of existence or equivalent from the home jurisdiction. 
• The name and address of the resident agent in Puerto Rico. 
• The corporation’s assets and liabilities. 
• The purpose of the business. 
• The names of the existing directors and their addresses. 

Check the official government website for more information. 

However, there are many companies that use an Employer of Record, making hiring simpler, faster, and more convenient. 

Payoneer Workforce Management allows employers to engage talent and onboard them while staying compliant, without having to set up a legal entity. 

PEO in Puerto Rico

In Puerto Rico, a Professional Employer Organization (PEO) can help employers with HR and payroll-related tasks. However, organizations should have a legal entity in Puerto Rico. 

On the other hand, an EOR in Puerto Rico does not require a legal entity and instead acts as the legal employer for the local team. This often makes it a suitable option for companies entering the Puerto Rican market.

Payoneer Workforce Management’s Employer of Record services in Puerto Rico

Setting up a local entity in Puerto Rico may be a challenge for growing companies looking to hire talent quickly. Payoneer Workforce Management helps businesses onboard, manage, and pay employees in Puerto Rico without the need to establish a local entity.

As your Employer of Record in Puerto Rico, we support with key responsibilities such as employment contracts, benefits administration, taxes, and payroll, while you continue to manage the employee’s day-to-day activities.

Book a demo today to learn more. 

FAQs

1. Do companies need a legal entity to hire employees in Puerto Rico?

No, companies do not necessarily need a legal entity to hire employees in Puerto Rico. Local talent can be onboarded through an EOR in Puerto Rico, which will support with legal compliance and streamlines talent engagement. 

2. What are the benefits of using an Employer of Record?

An Employer of Record in Puerto Rico can help employers onboard employees while taking care of compliance related to the labor laws, payroll management, local regulations, etc. This helps reduce the administrative burden on the employer and supports rapid market entry. 

3. What payroll obligations should employees consider in Puerto Rico?

When employers pay employees in Puerto Rico, they should process the payroll in compliance with the local regulations. This includes withholding income tax, contributions to social security, and other deductions as applicable under the Puerto Rican law. 

4. What are the normal working hours in Puerto Rico?

The normal working hours in Puerto Rico are eight hours every day. If an employee works overtime, the employer has to pay employees in Puerto Rico extra remuneration for the extra time they devote to work.

5. Are employment contracts needed in Puerto Rico?

Employment contracts in Puerto Rico, like written agreements, are recommended to clearly define job terms. When engaging talent through an Employer of Record in Puerto Rico, the EOR typically helps draft compliant employment contracts on the company’s behalf.